1.PURPOSE:To clarify the applicability of the cost limitations set forth in Section
641.405 of the SCSEP regulations to experimental private sector training projects
authorized under Section 502(e).

2.REFERENCES: 20 CFR Section 641.405(b)(2)

3.BACKGROUND: Section 641.405(b)(2) contains the "75 percent rule" which
states that "the amount of Federal funds budgeted for enrollee wages and fringe
benefits shall be no less than 75 percent of the grant." There have been some
questions about whether the "75 percent rule" applies to private sector training projects
authorized under section 502(e) or only to "regular" SCSEP projects.

4.DIRECTIVE: The "75 percent rule" applies to each SCSEP grant funded by
the Department of Labor, but it does not necessarily apply to individual projects. A
grantee may choose to spend less that 75 percent of its Section 502(e) funds on
enrollee wages and fringe benefits, provided that, when its federal SCSEP grant funds
are looked at in the aggregate, the grantee is spending at least 75 percent on its federal
funds on enrollee wages and fringe benefits. When the Department awards funds
competitively for section 502(e) projects, the competitively awarded funds are added to
the regular SCSEP grant through a grant modification. Therefore, the "75 percent rule"
is not applied directly to the competitively awarded funds; rather, it is applied to the total
funds in the grant, including those funds awarded competitively for private sector
training projects.

5.INQUIRIES:Questions should be directed to your Federal Representative at
(202) 693-3842.